“Quicklook” Assessment of Greater Adelaide's Assets & Challenges ...

Business Oriented Processes and Entrepreneurial Approaches
• A "First Tuesday" network (100 to 180 people that meet monthly) bridges funding
from angels to VCs, but there is no VC presence in these monthly networking
meetings.
• A VC summit is planned in August. Also, Business Vision 2010 is planning a VC
Forum at some point in the future.
• Playford Centre, a seed capital investment company that is 100% owned by
Government, whose scoring of applicants is based on people, market, and product,
report a good deal flow.
• Invest SA is a government program to encourage foreign direct investment. One
of their major areas of emphasis is the Information and Communications Technology
(ICT) sector. They take a marketing approach and do research working collectively
with other agencies locally. They are mandated to work on a statewide basis for
investment opportunities that are good for the region as a whole.
Physical Infrastructure and Resources
• A few VC funds have local representatives in Adelaide employed on an agency
basis who receive commissions based on the success of the companies.
• There is a national group of wealthy Australian angels that occasionally invest in
Adelaide start-ups, but the concept of "out of site, out of mind" seemed to prevail
since most investment capital originates in Sydney or Melbourne.
• The PricewaterhouseCoopers’ benchmarking study offers encourage in regard to
venture capital investment, at least for Australia as a whole. Australian venture capital
investment grew rapidly between 1998 and 1999 and early stage investment grew
faster than overall investment in this sector.
Barriers/Obstacles
• It is felt that there is not always a collective approach with regards to all of the
Government activities. Poor communications was cited as a problem at times.
• The fear of failure and its accompanying social stigma is seen as a limiting factor.
• There is an acknowledged "Valley of Death" in the $200k to $1M range in
Adelaide between funding from friends/family and funding from VCs. The problem
appears to be insufficient angel capital to develop good ideas to the VC stage.
• Many times, wealthy individuals in Adelaide prefer to invest in vines, beans, and
other agricultural schemes where they receive tax deduction up front, rather than
waiting 5 years to see if the I/T investment will pay off. VCs tend to be interested in
the tax benefits.
• The tax system, in general, has not been right to stimulate angel investment. For
example, the tax code encouraged dividend investment, rather than capital
investment.
• The ‘one hour rule’ – VCs tend to invest in opportunities that are located not more
than one hour away from their location.
• The Australian Bureau of Statistics’ report, Table 7, indicates that out of all
Australian companies receiving VC funding (651) in 1999-2000, only 16 were located
in South Australia, representing 2.6%. Those companies received only $46M, or
1.9% of the total $2,480M funded in Australia that year.
Table 7. LOCATION OF INVESTMENT
State/Territory Investee Companies Investment Value
No. % Share $M % Value
NSW 245 37.6 1,164 46.9
COMMERCIAL IN CONFIDENCE
124